Austin Skyline Growth in the area’s technology industry is leading the office space charge.

AUSTIN, TX—Austin employers will expand payrolls 3.9% in 2016 with the addition of 37,500 workers, including 11,500 positions in the primary office-using sectors. Last year, companies created 38,000 jobs, of which 12,000  are office-using, according to a report by Marcus & Millichap. Corporate expansions are intensifying in Austin, propelling job creation and fostering demand for office space.

Growth in the area’s technology industry is leading the charge as Apple, Google and other major technology firms make plans to increase staffing. Apple will complete construction on a new phase of its northwest Austin campus this year, expanding to 1.1 million square feet. It has pledged to create 3,600 positions during the next few years, nearly doubling its workforce in the region. The growth of these large tech companies is attracting startups and incubators to the area.

In addition, the development of the Dell Medical School and Dell Seton Medical Center at the University of Texas will drive advancement in the local healthcare community. The combination of a talented tech workforce and the addition of a growing medical field will boost the healthcare IT industry, increasing the need for office and medical office space in the metro. Strong demand for space and limited new inventory coming online in 2016 will facilitate another year of steep vacancy declines.

Investors remain positive about the Austin office market, a trend that will continue through 2016, says Marcus & Millichap. Rising tenant demand is drawing high-net-worth individuals to the metro in search of value-add properties. Assets built in the 1980s and 1990s with occupancies between 70 and 80% will garner multiple bids. These properties are prime for repositioning as rents are well below market in some instances. Class B assets sell at cap rates averaging in the 7% range, while class-C properties trade nearly 100 basis points higher.

Well-located, quality assets, meanwhile, are in high demand and elevated construction last year will satiate investors’ appetites as projects are leased up and brought to market. When available, these properties change hands at first-year returns in the low- to mid-6% range, says the report.

John Chang, first vice president, research services, Marcus & Millichap, tells GlobeSt.com: “Directly related to the office sector is steadily rising home prices and a growing population base. These will facilitate strong demand for apartments in Austin this year. More than 60,000 individuals will move to the metro in 2016, supporting the creation of 23,000 households in the area.”

Join the conversation June 2 at RealShare AUSTIN. Click here for more details on Austin’s premier CRE event.